Baidu Inc. (BIDU:US), operator of China’s most popular search engine, sold $1 billion of five-year bonds in the country’s largest overseas corporate bond sale in two months to help fund the takeover of app store 91 Wireless Websoft Ltd.
The senior unsecured notes were priced to yield 3.29 percent, or 1.9 percentage points over similar-maturity U.S. Treasuries, according to data compiled by Bloomberg. It’s the company’s first offering abroad since it issued $1.5 billion of debt in November. Average borrowing costs have surged for Chinese companies by 1.26 percentage points this year, compared to a 1.09 percentage-point jump in emerging-market corporate yields, JPMorgan Chase & Co. index data show.
The sale is China’s second benchmark issue since May as investors gauge the extent of the slowdown in the world’s second-largest economy. While Baidu has sufficient cash to fund its $1.9 billion acquisition of 91 Wireless as it seeks a greater share of the country’s mobile user market, the company went offshore for “tax efficient” financing, Moody’s Investors Service said yesterday in a report.
“The technology sector is considered more of a growth sector than a deep cyclical sector for China,” Michael Roche, an emerging-market strategist at broker-dealer Seaport Group LLC, said by phone from New York. “It’s still a growing field, compared to say metals or real estate, where a company would have had a more difficult time fulfilling their funding needs given the economic backdrop we have in China.”
Baidu, rated (BIDU:US) A3 by Moody’s, or four levels above junk, also sold five-year securities eight months ago in its debut offering, paying just 2.27 percent, or 1.6 percentage points over U.S. benchmarks.
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